Growth, not in the middle.

"Even with external uncertainties lingering, the Indian economy is expected to record a healthy growth of 7% in the upcoming financial year 2026-27." According to CareEdge Ratings, "The growth momentum has been supported by income tax cuts, GST rate rationalisation, continued momentum in services exports, easing inflationary pressures and RBI rate cuts." ET. All this is maybe true, "Yet beneath the headline numbers sits a quieter, more uncomfortable reality: urban India, especially its middle class, is still holding back." "Rural demand has led the recovery," but "Urban consumers drive discretionary spending, from cars and appliances to housing upgrades and lifestyle services. When they delay purchases, entire value chains slow." ET. Rural demand partly depends on the National Rural Employment Guarantee Scheme (NREGS) which entitles "every rural household to demand up to 100 days paid manual work each year at a statutory minimum wage." The central government paid 90% of the cost. Now the scheme has been replaced by a scheme called G RAM G which will force states to pay over 40%, wrote Soutik Biswas. Already, "A surge in borrowing by Indian states is complicating the central bank's efforts to lower interest rates as officials worry the increased supply of bonds could affect the yield curve." "State governments are issuing debt at a pace that increasingly rivals sovereign borrowing, significantly boosting bond supply for a shared pool of investors." Reuters. The central government may be slyly trying to shift its expenditure on the states but increased cost of borrowing will nullify some of the gain. As a result, "The delay in including Indian bonds in a key global index has raised the chances of the central bank extending its record government debt buying, seeking to cushion the market from weaker foreign inflows and rising yields." Reuters. This is also known as monetizing government debt by creating new money and is considered to be inflationary  (wikipedia), but the RBI may think it can get away with it because the Consumer Price Index (CPI) inflation came in at a low 1.3% in December (HT), while the Wholesale Price Inflation was even lower at 0.83%.  Such low inflation rates is because food prices fell by 0.43% in December after falling 4.16% in November, with vegetable prices falling 3.50% in December after falling by an enormous 2023% in November. TOI. Vegetables are perishable so the crash in prices will hurt farm income and may adversely affect rural spending. "With just 17 net hires in the first nine months of the 2025-26 financial year, India's top five IT companies eased off the hiring throttle and moved firmly into caution mode." TOI. Bad news for first-time job seekers. According to the State of Working India 2023 report by Amit Basole and his team at Azim Premji University, "Although upward mobility at the lower end of the hierarchy has improved somewhat in recent years, it's still severely restricted." "Folks at the top of the ladder don't see the teeming masses as a meaningful market," while "those at the bottom of the pyramid lack the education and skills to manufacture things for the wealthy at home and overseas." Gig work will not raise them to the middle class. "An unambitious elite spoiled by finance - plus a working class held back by inadequate education and inequities of caste and gender - are stymying the emergence of a global middle class in India." No middle class, lower tax collections. Will the RBI keep printing money to support the government? The world watches.